Uncovering investment candidates using financial analysis. Making sense of the myriad of financial data and turning it into actionable information.

Tuesday, February 5, 2013

Financial Infographic - Using Compound Growth to Grow Wealth

The second in our three part infographic series developed to help investors understand the underlying concepts behind financial and investment analysis. These same basic concepts and equations have been used by Verdasis to develop unique financial analysis software to more effectively manage complex personal or institutional investment portfolios using data readily available from financial statements, the market as well as beta and macro-economic data. Our software enables investors to run their own ratios, regressions and equations or to simply use financial analysis models to obtain immediate results.

The infographic identifies two key equations of wealth, the balance sheet equation of Assets – Liabilities = Equity, which we call the wealth equation and the wealth growth equation, which calculates equity growth over time. The latter equation is equal to the sum of the weighted averages of asset growth and liability growth. According to the infographic, both equations impact wealth and individuals can alter their wealth profile by understanding and adjusting the constituent parts. Improving either equation will deliver positive results, but enhancing both will greatly increase compound growth.

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